The Ruler of Dubai and Vice President and Prime Minister of the UAE Sheikh Mohammad Bin Rashid has recently enacted changes to the Dubai International Financial Centre (DIFC) legal framework. The new regime sets up-to-date standards for company laws in the DIFC, aligning it with international best practices and improving transparency and accountability.
DIFC Law No. 5 of 2018 (Companies Law) and DIFC Law No. 7 of 2018 (Operating Law), along with the Companies Regulations, the Operating Regulations and the Ultimate Beneficial Ownership Regulations, came into force effective 12 November 2018 repealing and replacing the previous Companies Law DIFC Law No. 2 of 2009.
One of the major changes is the abolition of the limited liability company as one of the legal entities recognized in the DIFC. A distinction has been introduced instead between private and public companies. The former are smaller companies with at least one and no more than 50 shareholders, may not make an offer of their securities to the public and their name is to be followed by “Limited” or “Ltd”. The latter may have any number of shareholders, may make an offer of their securities to the public and their name is to be followed by “Public Limited Company” or “PLC”. For the existing DIFC LLCs, the reclassification is automatic on the date of enactment of the new Companies Law, with a grace period of 12 months for the companies to amend their articles of association.
The new rules clarify the role and expand the responsibilities of company directors. They are expected to promote the success of the company, exercise independent judgment, reasonable care, skill and diligence. Furthermore, directors are expected to disclose any interest in a transaction that is entered into or is proposed to be entered into by the company that conflicts or may conflict with the interests of the company.
Among other major changes, it is worth mentioning that shareholders unanimous consent is not required anymore for written resolutions to pass. A simple majority of shareholders entitled to vote is now required for ordinary resolutions, while a special written resolution can now be passed by shareholders holding at least 75% of the total voting rights. Lastly, under the new regime, a statutory pre-emption right for existing shareholders has been expressly introduced for both public and private companies.
Copies of the new laws and regulations can be accessed through the DIFC online Legal Database at https://www.difc.ae/business/laws-regulations/legal-database/.
Companies registered or that will be registered in the future in the DIFC are required to comply with the new regime. Get in touch using our contacts below: we are ready to assist you with any further questions or need you may have in connection with the new DIFC company Laws.
LIMITED LIABILITY COMPANY ABOLISHED Under the new regime, only companies limited by shares, public or private, are authorized to operate in the DIFC.
LTD OR PLC The name of a private company limited by shares must now end with the ‘Limited’ or ‘Ltd.’ The name of a public company limited by shares must end in “Public Limited Company” or “PLC”.
DIRECTORS’ DUTIES STRENGTHENED. The former is any subject that determines the purposes and means of the processing of personal data, the latter is any subject that processes personal data on behalf of a data controller.